Moody's Investors Service said it has placed under review for possible downgrade the Aaa rating of the state of New Mexico's general obligation bonds, affecting $327 million in outstanding debt.
In conjunction with this action, Moody's also placed under review for possible downgrade the following related ratings: the Aa1 rating on the state's lease appropriation bonds (Fort Bayard Project) Series 2008, issued through Grant County; the Aa1 rating on the New Mexico School District Enhancement Program (post March 30, 2007); and the Aa1 rating on the New Mexico School District Enhancement Program (pre March 30, 2007).
The review for downgrade is triggered by the state's recently released August revenue estimates which show an extremely large reduction in estimated general fund revenues for both fiscal 2016 and fiscal 2017, compared to its prior forecast prepared in January.
The fiscal 2016 revenue estimate was reduced by $348 million, resulting in a significant drawdown of total general fund reserves to $130 million or 2.3% of recurring revenues. The fiscal 2017 revenue estimate was reduced by $556 million, throwing the budget into structural imbalance.
Absent any legislative action, the August estimates would result in an ending reserve deficit for 2017 of $326 million or -5.7% of recurring revenues, Moody's said. The legislature will convene in special session this month to address the shortfalls. The state has a long track record of taking timely action to address budget shortfalls and to maintain adequate reserves, the rating agency noted.
